Penalty imposed on the Auditor for non classification & disclosure of the loans in the Audited Financial Statements
ROC is acting tough against the auditor for improper preparation of the financial statements. Not preparation of the financial statements in accordance with section 129 & Schedule III of the companies Act is liable for penalty. In the present case, at Para 3.3 following observation were made:
3.3 As Per Section 129(1) of the Companies act,2013, the Financial Statements shall give true and fair view of the state of affairs of the Company, comply with the Accounting standards notified under section 133 and be in from as provided in Schedule III
The Company has shown advances from relatives and customers under the head long-term borrowing in the financial stetment for the F.Y. 2019-20 Amounting to Rs.1,13,79,970.50/- however such advances have neither been separately classified as advances from relatives and others nor sub-classified as Secured / Unsecured and also the nature of security of such loans and advances has not been disclosed as required is Schedule III of the Companies Act,2013.
Hence the Company has violated with the Section 129 read with Section 133 and Schedule III of the Companies Act,2013 in the aforesaid financial year , there by the true and fair view of the State of affairs of the Company has also been affected.
Thus, the auditors has failed to comment on the classification of the long-term borrowings in the audit report for the aforesaid financial year.
The copy of the order imposing the penalty on the auditor is as under: